The UK banking and financial services industry as a whole has undergone significant change in the last 10 years – the financial crisis was a watershed moment and according to regulators and politicians heralded a new dawn for banks. Financial regulation has now been tightened and banks are not shy about coming forward when it comes to demonstrating their commitment to the customer. It is likely, however, that the banking landscape will witnesses further change in the next decade.
According to research from PwC, “the market will become increasingly diverse and modularised, with new companies specialising to offer very specific components of banking services or products.” Open Banking, underpinned by a new regulatory regime, will compel banks to share much more customer information than we have seen before via new technologies such as APIs, application programming interface.
This is potentially very good news for a bank such as HTB. In short, product and service innovation will come if customers allow banks to share their data. This will in turn drive competition and reduce the stranglehold of the big banks.
However, there are many barriers to this scenario and the full potential of Open Banking will take some time to realise, for several reasons. Firstly, research by Harris-Interactive, a market research agency, shows that only 38 per cent of UK people would be willing to allow access to their banking data and 31 per cent weren’t interested at all. The main issue here is concern around data security, privacy and fraud. If customers aren’t willing to share their data, it will be impossible for banks such as ourselves to tap into this market. That customers are unwilling to participate in Open Banking also demonstrates, in my view, one fundamental issue: that more needs to be done to advertise and market the benefits of the Open Banking initiative – this includes ourselves, as specialist banks, but also Open Banking themselves. Moreover, new research by YouGov has shown that only 14 per cent of 18 – 24 year olds have heard of Open Banking. This is deeply worrying as this age group arguably has the most to benefit from the initiative.
Needless to say, HTB remains very supportive of the Open Banking initiative. Whilst more needs to be done to educate consumers of all ages, it is clear that Open Banking has the potential to benefit customers and new players in the banking market. Moreover, until specialist banks understand exactly what to do with Open Banking we are some way from it representing a golden era for competition in the banking world. Nevertheless, it will be fascinating to see how the discussion evolves over the coming months.
Stuart Hulme is Director of Marketing and Savings